UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
April 30, 2006
Mr. Bradley C. Barron
Vice President - General Counsel and Secretary
Valero GP Holding, LLC
One Valero Way
San Antonio, Texas 78249
Re: Valero GP Holdings, LLC
Registration Statement on Form S-1
Filed March 31, 2006
File No. 333-132917
Dear Mr. Barron:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Where comments on a section also relate to disclosure in
another
section, please make parallel changes to all affected disclosure.
This will eliminate the need for us to repeat similar comments.
2. Please fill in all blanks throughout the registration
statement.
We note that information that you have excluded includes
information
you are not entitled to omit under Rule 430A.
3. Please file all omitted exhibits as soon as practicable. Note
that
we will need additional time to review the exhibits once they are
filed. We may have further comments.
4. Please provide the information required by Item 305 of
Regulation
S-K with respect to Valero L.P. The disclosure required by the
item
appears to be material, given that interest rates could adversely
affect Valero L.P.`s business, as noted on page 33.
Cover Page
5. Please update to include the price range prior to
effectiveness.
6. Please revise the cover page to indicate specifically that
Sigmor
Corporation will provide the additional securities to cover the
over-
allotment option. We note your disclosure later in the document.
Prospectus Summary
7. We note that you anticipate that Valero Energy will divest all
its
interest in your company. Please discuss, if known, the reasons
for
such divestiture.
Ownership of Valero GP Holdings, LLC, page 6
8. Please revise this caption to clarify that the chart represents
your structure after the completion of the resale offering. Also,
provide narrative explanation of the chart. To aid investor
understanding, please also include a chart that details your
ownership
prior to the offering.
The Offering, page 7
9. Please tell us what effect, if any, the issuance of your units
to
subsidiaries of Valero Energy in exchange for their current
ownership
interests will have on your financial statements. If applicable,
include pro forma equity alongside your most recent historical
balance
sheet to reflect the changes in equity anticipated in conjunction
with
your IPO.
10. We note that you will issue units to subsidiaries of Valero
Energy
in exchange for their current ownership interests in you. Please
disclose the purpose of this transaction.
Valero L.P., page 9
11. Please provide objective support for the following statements:
* "On July 1, 2005, Valero L.P. completed the acquisition of
Kaneb
Services LLC and Kaneb Pipe Line Partners, L.P. (collectively,
"Kaneb") and became one of the largest independent terminal and
petroleum liquids pipeline operators in the United States" on page
9;
* "Valero L.P. provides terminalling services for crude oil and
refined petroleum products to many of the world`s largest
producers of
crude oil, integrated oil companies, chemical companies, oil
traders
and refiners," on page 102
* "This facility ... can accommodate the world`s largest tankers
for
loading and discharging crude oil and other petroleum products" on
page 99; and
* "With one of the premier jetty facilities in North America, the
Point Tuper facility can accommodate substantially all the world`s
largest, fully laden very large crude carriers and ultra large
crude
carriers for loading and discharging crude oil, petroleum
products,
and petrochemicals," on page 99.
Comparison of Rights of Holders of Valero L.P.`s Common Units and
Our
Units, page 10
12. Please revise the caption "Limitation on Issuance of
Additional
Units." The caption suggests that there may be restrictions on
the
issuance of additional securities, when, in fact, the opposite is
the
case.
Risk Factors, page 20
13. Please revise the following subheading. The subheadings
discuss a
fact or facts about your business but do not discuss the
associated
risks:
* "Our only cash generating assets are our ownership interests in
Valero GP, LLC and Riverwalk Holdings, LLC, which own the 2%
general
partner interest, 100% of the incentive distribution rights and a
21.4% limited partner interest in Valero L.P. Our cash flow is
therefore completely dependent upon the ability of Valero L.P. to
make
cash distributions to its partners, including us";
* "Our cash distribution policy limits our ability to grow," on
page
25;
* "Valero L.P.`s common unitholders may not have limited liability
if
a court finds that limited partner actions constitute control of
Valero L.P.`s business," on page 27; and
* "The rates that Valero L. P. may charge on its interstate
pipelines
are subject to regulation by various federal and state agencies,
such
as FERC and the STB," on page 36.
14. Discuss in a risk factor how unitholders may be impacted by
the
authorization of additional securities, which do not require
unitholder approval.
15. It appears that you do not have provisions in the event that
you
do not have enough cash to meet your needs. If this assessment is
correct, please discuss how you intend to meet your cash
requirements.
16. We note that the partnership agreement requires the
distribution
of all available cash, including certain borrowings. In light of
this, please discuss how you intend to pay back borrowed funds.
17. We note that unitholders do not have arrearages rights.
Please
discuss in a risk factor how this impacts the unitholders.
18. Please discuss the risks associated with (1) having only three
board members, particularly, in light of the staggered nature of
their
terms; and (2) not having a majority of independent directors or a
compensation or a nominating committee.
19. We note that a quorum for the purpose of holding a regular or
special meeting will exist if a majority of members participate in
the
meeting. Given that your board may consist of only three members,
a
quorum would consist of only two members. Please address in a
risk
factor the possibility that a corporate action may be considered
for
approval by only two members of your board.
20. Discuss the risks associated with the ability of Valero L.P.`s
general partner to issue limited partnership interest having
special
or superior voting right without consent of the limited partners,
as
noted on page 156.
Valero L.P.`s unitholders, excluding the owner of Valero L.P.`s
general partner, have the right to remove..., page 21
21. Please expand this risk factor to explain why the 2% general
partner interest and incentive distribution rights will not be
equivalent to other interests Riverwalk Logistic, L.P. may acquire
in
exchange.
Valero L.P.`s operations are subject to federal, state and local
laws..., page 32
22. In discussing the risk factor, please reference specific
regulatory actions and findings. For example, on page 116, we
note
that the U.S. Department of Justice advised Kaneb in 2001 that it
intends to seek reimbursements for remediation costs.
Our Cash Distribution Policy and Restrictions on Distributions,
page
44
Our Initial Quarterly Distribution, page 47
23. We note that you present two pro forma items entitled "Pro
Forma
Cash Available for Distribution" and "Estimated Minimum Cash
Available
for Distribution Based upon Estimated Minimum EBITDA of Valero
L.P."
We further note your statement with respect to these items that
this
"information [was] not prepared with a view toward compliance with
published guidelines of the SEC or the guidelines established by
the
American Institute of Certified Public Accountants for preparation
and
presentation of prospective financial information, and were not
prepared in accordance with accounting principles generally
accepted
in the United States of America nor were procedures applied
pursuant
to auditing standards of the Public Company Accounting Oversight
Board
(United States)." Please explain how you have complied with the
requirements of Item 10(e) of Regulation S-K and/or Regulation G
and
clarify whether the measure is liquidity or a performance measure.
Our Cash Distribution Policy and Restrictions on Distribution,
page 44
Our Source of Distributable Cash, page 58
24. Disclose whether there is a contractual obligation to convert
the
subordinated units into common units by the second quarter of
2006.
Management`s Discussion and Analysis of Financial Condition and
Results of
Operations, page 65
Valero GP Holdings, LLC
25. Please confirm, if true, that you had no i) off-balance sheet
arrangements required to be disclosed under Item 303(a)(4) of
Regulation S-K and ii) information required to be disclosed in the
table of contractual arrangements identified within Item 303(a)(5)
of
Regulation S-K or otherwise advise.
Valero L.P.
26. Please revise your disclosure to ensure that the chronological
ordering of your financial statements and other data presented in
tabular form throughout the filing is consistent, as contemplated
by
Staff Accounting Bulletin Topic 11:E.
27. We note your discussion regarding your acquisition of Kaneb.
Please expand your discussion to disclose that Kaneb may be
required
to make substantial payments to the U.S. Department of Justice for
remediation costs. In this regard, we note your disclosure on
page
116.
Outlook, page 80
28. You state that certain Valero Energy`s refineries served by
Valero
L.P. are expected to undergo maintenance turnarounds to address
certain environmental regulations. As a result, you expect that
Valero L.P.`s throughputs and revenues will be negatively
impacted.
Please quantify such negative impact.
Liquidity and Capital Resources, page 82
29. We note that on March 11, 2004, Valero L.P.`s partnership
agreement was amended to lower the general partner`s incentive
distribution rights. Please disclose why the rights were lowered
and
whether you anticipate further lowering in the future.
Related Party Transactions, page 86
30. Please disclose, where applicable, whether the terms of the
related party transactions were equivalent to terms agreed-upon in
similar transactions with non-affiliates.
Business of Valero, L.P., page 97
Competition and Business Considerations, page 111
Crude Oil Storage Tanks
31. We note that Valero L.P. owned in 2005 crude oil and
intermediate
feedstock storage tanks located in leased property. Please
disclose
whether Valero L.P. continues to lease such property, the cost of
leasing the property, and whether the lease is renewable.
Valero L.P.`s Pipelines Rates, page 112
32. We note your statement that Valero Energy has committed to
refrain
from challenging several of Valero L.P.`s petroleum products and
crude
oil tariffs until at least April 2008. Disclose whether Valero
Energy
is contractually obligated not to challenge the tariffs.
Legal Proceedings and Other Contingencies, page 115
Valero, L.P.
Grace Energy Corporation Matter
33. Please disclose whether Kaneb Services LLC and Kaneb Pipe Line
Partners, L.P. have made any payments toward costs incurred by the
Department of Justice to remediate groundwater contamination
associated with the Otis AFB pipelines.
Port of Vancouver Matter, page 115
34. We note that Kaneb has submitted a remedial plan to the
Washington
Department of Ecology regarding the remediation of groundwater
contamination at the Port of Vancouver terminal. Please disclose,
if
known, the amounts Kaneb expects to spend in remediation.
Management, page 117
Long-Term Incentive Plan, page 118
35. We note your statement that your long-term incentive plan will
be
administered by your compensation committee. On page 117,
however,
you note that you will not be required to have a compensation
committee. Please disclose whether or not you will have a
compensation committee.
Valero L.P.
Directors and Executive Officers, of Valero GP, LLC, page 120
36. Your disclosure suggests that Mr. Klesse concurrently served
as
Executive Vice President and Chief Operating Officer of Valero
Energy
and as Executive Vice President-Refining and Commercial Operation
of
Valero Energy. If this is not correct, please revise. Also,
revise
Mr. McLelland`s biographical sketch to disclose his business
activities, if any, between March 2001 and October 2005.
37. Please expand the biographical sketches to disclose the amount
of
time your officers devote to your business. In this regard, we
note
that your executive officers perform similar duties at your
affiliates.
Security Ownership of Certain Beneficial Owners and Management,
page
127
Valero GP Holdings, LLC
38. Revise to disclose the address of each person named as a
beneficial owner.
Certain Relationship and Related Transactions, page 130
39. Please discuss the implications of the reduction of Valero
Energy`s ownership in you to less than 51% thereby triggering a
"change in control."
40. State, where applicable, whether the terms of the agreements
described herein are equivalent to terms of agreements with non-
affiliated parties.
Valero L.P.`s Relationship with Valero Energy, page 131
41. Please disclose the annual fee paid to Valero Energy pursuant
to
the Old Service Agreement.
42. Please explain what constitute a "material adverse effect"
justifying the suspension of Valero Energy`s obligation under the
Pipeline and Terminals Usage Agreement. Also discuss whether the
agreement limits the duration of the suspension.
Limited Call Right, page 144
43. We refer you to your discussion under the Limited Call Right.
Please advise us as to what consideration was given as to whether
you
will comply with the tender offer rules and file a Schedule TO
when,
or if, this right is exercised. If you believe an exemption from
the
tender offer rules is available, please advise.
Units Eligible For Future Sale, page 166
44. Please identify those unitholders referred to as "your
principal
unitholders" in the last paragraph under this caption.
Selling Unitholders, page 182
45. Please describe the material terms of the transactions in
which
the selling unitholders received the shares that you are
registering
for resale. We believe that the material terms of the
transactions in
which the selling shareholders received their shares is
information
required to be disclosed under Item 507 of Regulation S-K. In
this
regard, we note your disclosure on page 7.
Underwriting, page 183
Lock-up Agreements, page 184
46. Disclose whether Lehman Brothers has any present intent to
release the lock-ups early.
Valero GP Holdings, LLC
Unaudited Pro Forma Statement of Income, page F-4
47. Please remove your pro forma adjustment for expected costs of
being a publicly traded limited liability company. Please also
modify
your determination of pro forma income tax accordingly. Refer to
Rule
11-02(b)(6) of Regulation S-X.
Valero GP Holdings, LLC Combined Balance Sheets, page F-9
48. With respect to your members` equity, please distinguish
between
amounts ascribed to each ownership class as contemplated by SAB
Topic
4:F. In this regard, the equity attributed to the general partner
should be stated separately from the equity of the limited
partners.
Valero GP Holdings, LLC Combined Statements of Income, page F-10
49. Disclose pro forma net income per subordinated unit and per
common
unit for each period presented utilizing the number of units to be
outstanding immediately following your IPO. Refer to SAB Topic
4:F.
Note 1. Organization and Summary of Significant Accounting
Policies,
page F-13
50. We note your statement that "Public unitholders held the
remaining
76.6% interest as of that date through their ownership of
36,587,655
common units of Valero L.P." Please reconcile the amount you
indicate
here as held by public unitholders with that on page 6 of
36,593,088.
Note 2. Investment in And Transactions with Valero L.P. and Valero
Energy, page F-16
Related Party Transactions, page F-18
51. Please tell us how you determined "that no corporate costs
were
incurred specifically on behalf of Valero GP Holdings."
Other, page F-19
52. Please expand your disclosure to explain what the line item
step-
up in basis related to Valero L.P.`s assets and liabilities,
including
equity method goodwill" represents.
Valero L.P. and Subsidiaries Consolidated Statements of Income,
page
F-31
53. Please confirm if true, that your presentation of costs and
expenses conforms to Rule 5-03(b)(2) of Regulation S-X or
otherwise
advise.
54. Please separately disclose the amount earned from transactions
with related parties and the amounts of costs and expenses
incurred
from transactions with related parties. We note your related
disclosure on page 86 and footnote 14. Refer to Rule 5-03(b)(1)
and
(2) of Regulation S-X.
Environmental Remediation Costs, page F-37
55. We note that you have accrued liabilities for environmental
remediation costs over a 20-year time period. Please expand your
disclosure to indicate why you believe using a 20-year time period
is
appropriate.
Note 9. Accrued Liabilities, page F-47
56. Please add disclosure to explain the nature of the items
reported
in the line item Product shortages.
Note 11. Health, Safety and Environmental Matters, page F-51
57. Please revise your disclosure to conclude using terms defined
in
paragraph 3 of SFAS 5. These terms are defined by SFAS 5 and we
believe that any disclosure that describes how you applied the
standard, including your conclusions as to the likelihood of loss,
should also use those terms. This comment also applies to your
disclosure under footnote 12 and to Kaneb Services LLC and
Subsidiaries contingency disclosure under footnote six beginning
on
page F-74.
Note 16. Partners` Equity, Allocations of Net Income and Cash
Distributions, page F-60
58. Please provide detail of the changes in the number of shares
of
common units. See Rule 3-04 of Regulation S-X and paragraph 10 of
APB
12.
Note 17. Income Taxes, page F-62
59. Please tell us why your "management does not believe that, in
[y]our circumstances, the aggregate difference would be meaningful
information" with respect to disclosure of the aggregate
difference in
the basis of your net assets for financial and tax reporting
purposes.
Note 18. Segment Information, page F-63
60. Please reconcile the amount of total capital expenditures you
disclose under the 2005 column to the amount disclosed in your
consolidated statements of cash flows on page F-32.
Note 19. Condensed Consolidating Financial Statements, page F-66
61. We note your statement, "the following condensed consolidating
financial statements are being presented for the current year as
an
alternative to providing separate financial statements of Valero
Logistics and KPOP." Please provide us with an analysis in
support of
your determination that separate, full financial statements are
not
required to be presented in accordance with Rule 3-10 of
Regulation S-
X.
62. Please cite the guidance you are relying on in support of your
abbreviated presentation of cash flows from investing and
financing
activities.
Kaneb Services LLC and Subsidiaries Condensed Notes to
Consolidated
Financial Statements
Note 6. Contingencies, page F-74
63. We note your disclosure that "Subsequent to the acquisition of
the
Company by Valero L.P., new management of the Company determined
based
on a comprehensive review of the matters disclosed below that an
additional $42 million accrual for potential loss contingencies
was
required." Please expand this disclosure to provide the facts and
circumstances surrounding the need for this additional accrual.
Kaneb Services LLC Consolidated Financial Statements
64. Please provide the calculations in support for your
presentation
of Rule 3-05 of Regulation S-X audited financial statements of
Kaneb
Services LLC and subsidiaries for the two years ended December 31,
2004.
Kaneb Services LLC Notes to Consolidated Financial Statements,
page F-
86
Note 2. Summary of Significant Accounting Policies, page F-86
65. We note the disclosure that "To the extent impairment is
indicated
to exist, an impairment loss will be recognized by the Company
based
on fair value." Please confirm, if true, that this methodology
complies with paragraph 7 of SFAS 144 or otherwise advise.
* * * * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Act of 1933
and
that they have provided all information investors require for an
informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in connection with our review of your
filing or
in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering of
the securities specified in the above registration statement. We
will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Jennifer Goeken at (202) 551-3721 or Jill
Davis,
Accounting Branch Chief at (202) 551-3683 if you have questions
regarding comments on the financial statements and related
matters.
Direct your questions relating to the engineering comments to
James
Murphy, Petroleum Engineer, at (202) 551- 3703. Please contact
Carmen
Moncada-Terry at (202) 551-3687 or, in her absence, the
undersigned,
at (202) 551-3685 with any other questions.
Sincerely,
Tangela Richter
Branch Chief
cc: J. Davis
J. Goeken
J. Murphy
T. Richter
C. Moncada-Terry
VIA FACSIMILE
Gislar Donnenberg
Andrews Kurth LLP
713.238.7167
Mr. Bradley C. Barron
Valero GP Holding, LLC
April 30, 2006
Page 1